Some things seem self-evident–until they are not. One self-evident notion is that just as we have a Spotify and a Pandora for music, just as we have a Netflix for video, we should indeed have something akin to these services for books. It seems obvious to many people that only the sluggishness if not outright stupidity of publishers would get in the way of the inevitable.
Of course, (this argument goes) no one should ever underestimate how stupid publishers can be. With some notable exceptions (e.g., HarperCollins) they remain skeptical about putting all their titles into aggregations controlled by third parties–which set the prices for the services and pay the publishers out of their meager revenue. Personally, I marvel at Pandora. I am a subscriber–for a whopping $36 a year–and stream Pandora approximately 8-10 hours a day, every day. I am listening to it now as I write this post (the Cold War Kids station). I don’t know how many songs I listen to in a year, but it must be in the thousands. How much does that come to per song? On the other hand, Pandora’s listeners are encouraged to purchase music they like. I have not purchased any music in years, and there is not a chance in the world that I will ever go to a CWK concert. I will enjoy Pandora while it lasts, but it does get at the point that record labels, movie studios, and publishers do not exist to make their users happy but to make their shareholders happy. What may appear to be sluggishness or lack of vision on the part of publishers may in fact be a shrewd understanding of their own interests.
Before we assess the appeal of a Netflix for books, we should spend a moment describing just what Netflix is, as there seems to be some confusion about this. Netflix has 2 services and has hinted about the possibility of a third. The first is the original service, which consists of ordering DVDs from a Web site, which are then shipped by mail to consumers. This service still operates today and has about 7 million subscribers. I am among them. Netflix carries every DVD and Blu-Ray disk that is available, and a tour through the Netflix catalogue is one of the world’s great wonders. I just now searched for the films of Rainer Werner Fassbinder, whose films I eagerly traveled into New York to see (at great expense) in the 1980s. Most of them are now available on Netflix, all for a modest monthly subscription. I will watch all of them again, along with the films of Fellini, Herzog, Antonioni, Von Stroheim, Billy Wilder, Woody Allen, and on and on and on. Netflix’s DVD service is comprehensive because virtually every movie has been put on a DVD, which Netflix can purchase directly from the producer or studio or at Wal-mart like anyone else.
But is it truly comprehensive? Well, no. Movie studios don’t release DVDs at the same time films appear in theaters; the DVD or Blu-Ray trails the feature film release by 6 months to a year. People who simply must see the latest feature film releases will be disappointed in this service. For them it’s standing on line at the theater or nothing.
It’s worth noting that the Netflix DVD service is a creature of a particular time and place. Netflix came into existence just as the DVD format was launched, replacing the videotape, which would have been too expensive to mail and subject to rapid wear and tear. And it came about before consumer broadband services were widespread, before there was a YouTube, that most astonishing technical achievement, which ushered in the age of streaming video. A few years earlier or a few years later and there never would have been a Netflix.
The second Netflix service is the one that is taking the Internet by storm, its streaming video service, where for an incredibly low price of about $8 a month, you can watch an unlimited number of videos. There is a catch, however, in that unlike the DVD service, the streaming service is not and never will be anything close to comprehensive, even if you allow for a lag time of a year. This is because every streaming movie or TV show must be licensed from the producer, and some producers do not and will not license their content to Netflix. Take the immensely popular Game of Thrones, for example. The DVDs are available on Netflix, but the streaming video is held closely by the producer, HBO. Were HBO to license Game Of Thrones to Netflix, some people would happily cancel their HBO subscriptions in favor of the technically more proficient and much less expensive Netflix.
I said that there is a hint of a third Netflix service. This is conjecture on my part, but when Netflix announced a licensing deal with Disney a while back, the wording of the press release seemed to suggest that some Disney movies would be made available not through streaming but on demand, a marketing model now being used by Amazon and Vudu among others. It’s fairly easy to forecast how the video business will look over the next 3-5 years. The comprehensive DVD business, with its built-in lag time, will continue to decline (boo and hiss!), overtaken by all-you-can-eat streaming services that consist mostly of older and second-tier content that is bundled in aggregations with a handful of stellar first-run offerings (e.g., House of Cards) acquired to bring in new subscribers. Alongside these aggregations will be the on-demand world of first-run movies and the finest videos, all titles that will eventually decline in value and then be moved over to streaming bundles. There will be some exceptions, of course, for films that are recognizable commercial classics: they will only be sold on demand.
So when people say they want a Netflix for books, which of these 3 services are they talking about? It’s my distinct impression that most people confuse Netflix #1 with Netflix #2, and they forget about the lag time for the DVDs. They want a comprehensive and fully up-to-date library for a low monthly price. This will hot happen for movies and video and it will not happen for books.
This does not mean that there will not be book aggregations. There already are. What it means is that aggregations are simply another distribution channel for content and have to be analyzed like any other. If an aggregation is comprehensive, it will cannibalize sales from other channels. Hence no aggregation can be comprehensive. If the aggregation releases titles too quickly, even if the aggregation is less than comprehensive, it could interfere with other channels, which interferes with the media strategy known as “windowing,” which releases properties along a planned-out timeline the better to maximize returns. An aggregation, in other words, is a limited collection of books placed on the market precisely when the value of those titles is not greater in other channels.
There is an exception to this, however, and it is an important one. When a single publisher is able to amass a sufficient collection in one area and has the means to sell things directly-to-consumers (D2C), that could be a very big win for both the publisher and the consumer. I have discussed this on the Kitchen before with regard to Penguin Classics and won’t repeat the argument here. Suffice it to say that a publisher with a commanding position in a particular field (say, anthropology or computational biology) could sell subscriptions to end-users and effectively soak up all the revenue for that particular subject. This would lead other publishers in that area to cut back on their programs, strengthening further the publisher with the leading position. The key here is the combination of D2C marketing and market dominance in a particular subject category.
So let’s ask the question the way it should be asked, not “why isn’t there a Netflix for books?” but how can I strategically modify my program to give me a compelling advantage over my competition, thereby yielding strong financial returns? Step one: focus on fewer categories, and perhaps only one. Step two: develop direct relationships with end-users. That’s what the Internet is telling us to do. Let’s listen.